London, March 11 (Bloomberg) -- The dollar may rise against the euro for a second day in eight amid speculation a war in Iraq may be delayed, checking a decline in U.S. business and consumer confidence. The dollar was trading at $1.1048 per euro at 10:05 a.m. in London from $1.1056 yesterday. It has shed 5 percent against the euro this year. Japan's currency fell to 117.12 yen per dollar from 116.53 on speculation the Bank of Japan may sell its currency to protect an export-led economic recovery. Six countries yesterday proposed to set an April 17 deadline for Iraq to comply with United Nations demands that it disarm, a month later than the March 17 ultimatum proposed by the U.S. and U.K. Signs that a war may be put off may encourage consumer confidence and foreign investment into the U.S., bolstering the dollar. ``Anything seen to be delaying war would be good for U.S. stocks and the dollar'' over the next few days, said Michael Klawitter, a currency strategist at WestLB. Given that many investors are already positioned to sell dollars, ``we need the actual outbreak of military action'' for the dollar to resume its decline.
The number of speculators' positions betting the euro will gain rose to a four-week high in the week ended March 4, as gauged by futures contracts on the Chicago Mercantile Exchange, according to Commodities Futures Trading Commission data. The more comments there are suggesting conflict will be averted or put off, ``the more cautious currency speculators will become,'' causing them to close positions benefiting from a falling dollar and buy the U.S. currency back, Klawitter said.
`More Time'
U.K. Ambassador Jeremy Greenstock told a closed session of the Security Council that his country is prepared to give Iraq more time beyond the March 17 date that was initially proposed. Pakistan, Mexico, Angola, Chile, Cameroon and Guinea put forward the April 17 deadline. France and Russia also yesterday stiffened their opposition to the U.S. amid diplomatic wrangling so intense that diplomats said Greenstock told council members a vote on the resolution won't be called before March 13. The Security Council will hold a public debate on Iraq today, beginning at 3 p.m. New York time. ``The question is whether a war is now still on the radar screen,'' said Hans Redeker, head of foreign-exchange strategy at BNP Paribas. ``If they wait until mid-April, it's getting pretty close to a final deadline for a war'' in terms of favorable weather for an attack, he said. Some analysts said investors don't expect the U.S. to get United Nations backing for an attack, and that the main issue for the currency market is whether the conflict is over quickly or not. President George W. Bush last week said the U.S. doesn't need UN support for any action. ``A non-UN backed conflict is priced into the market,'' said Lee Ferridge, head of global currency strategy at Rabobank. The question is ``whether the war is dragged out or quick. If the early reports are that U.S. aims are being achieved, you will see the dollar gain.''
Yen
The yen fell against the dollar after Japanese Finance Minister Masajuro Shiokawa said the government is ready to ``step into the market aggressively and immediately'' as needed. Japan's currency had earlier risen to as high as 116.45. Japan spent almost 1.2 trillion yen ($10.2 billion) in the first two months of the year to keep the currency from strengthening. Larger Sales The Nihon Keizai newspaper reported that the Ministry of Finance may begin yen sales of almost 1 trillion yen a day. Such sales would benefit exporters and help avert a crisis after the Nikkei 225 stock index closed below 8,000 yesterday for the first time in 20 years. Hiroshi Watanabe, head of the Finance Ministry's international department, declined to comment when asked about the Nihon Keizai report. ``The BOJ is probably intervening today,'' said WestLB's Klawitter. The type of ``price action we've seen today can only be achieved through intervention.'' The Bank of Japan spent several hundred billion yen on March 7 after the dollar fell to 116.35 yen, its weakest since August, the Nihon Keizai newspaper said over the weekend, without citing anyone. The central bank has sold about 2 trillion yen this year to check the currency's gain, the newspaper said. //www.quote.bloomberg.com